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Lawyer Analyzes Benefits Conflict Case

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The new U.S. Supreme Court decision in MetLife vs. Glenn may do some good for insurers.

Eric Serron, a partner at Steptoe & Johnson, Washington, gave that assessment in comments on the implications of the decision.

Members of the court ruled 7-2 Thursday that an insurer that serves as both the provider and administrator of disability benefits governed by the Employee Retirement Income Security Act has an inherent conflict of interest.

The court cited a 1989 Supreme Court decision, Firestone Tire & Rubber Company vs. Bruch.

As in Firestone, “A court should be ‘guided by principles of trust law’, analogizing a plan administrator to a trustee and considering a benefit determination a fiduciary act,” Justice Stephen Breyer wrote in an opinion for the majority.

Serron says the MetLife decision is significant because it clarifies the Firestone precedent.

Although 2 justices dissented, all 9 agreed with the conclusion of the 6th U.S. Circuit of Appeals that an insurer that both provides insurance and makes benefit determinations has a conflict of interest.

A majority of the justices also indicated that an employer playing both roles would have a conflict of interest, Serron says.

In Firestone, Serron says, there was no indication that an employer or insurer necessarily acts with a conflict when it handles both roles.

But the decision of the majority includes language that may be helpful for insurers going forward, Serron says.

“In describing the circumstances that would reduce the significance of an insurer’s playing both roles, the majority indicated that, ‘[I]t should prove less important (perhaps to the vanishing point) where the administrator has taken active steps to reduce potential bias and to promote accuracy, for example, by walling off claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decisionmaking irrespective of whom the inaccuracy benefits,” Serron says.


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